The measure now goes to the House, which passed a similar version of the legislation last Saturday. But the Senate made changes that will require House approval before the bill can be sent to Gov. Susana Martinez.
Sen. Clemente Sanchez, D-Grants, described the bill as an attempt at compromise after years of debate over payday loans.
“This is probably not the end,” Sanchez said, “but at least we’re moving forward.”
The bill won approval on a 27-14 vote. Its opposition came from both the left and the right.
Some Republicans said people should have the freedom to enter any loan contracts they want. And some Democrats said the proposed interest rate limit – 175 percent – was far too high.
Sen. Craig Brandt, R-Rio Rancho, said he didn’t see small loans as “predatory,” as critics argue. He cast one of the “no” votes.
“Why are we infringing on people’s rights to borrow money at whatever rate they want to borrow it at?” he asked his colleagues. “No one forces them to borrow this money.”
Democratic Sen. Joseph Cervantes of Las Cruces said he believes New Mexico courts could already impose a much lower interest cap under existing laws, perhaps just 15 percent. Setting a higher rate, then, would actually hurt consumers, he said, and he voted against the bill.
But a bipartisan group of senators agreed to support the proposal.
Sen. Jeff Steinborn, D-Las Cruces, said the state had a real chance to protect people, even if the bill didn’t go as far as it should, in his view.
“We have been working on this problem for years,” he said, “and only rarely have we had an opportunity to make a difference.”
The proposal, House Bill 347, is sponsored by Democratic Rep. Patricia Lundstrom of Gallup and three other lawmakers.
A competing bill would have capped annual interest rates at 36 percent but failed to advance.
Critics of the loans say storefront loan companies prey on the poor and trap people in a cycle of debt.
Industry representatives contend the loans are an important way for people to borrow money when they have nowhere else to turn.